Cryptoverse is usually buzzing with new words which are usually difficult to decipher for a non-technical person. Even somebody like me, who is a little more familiar with Cryptos/Blockchain sometimes gets confused – but then again it presents a new learning opportunity. And this is where the ‘oracle problem’ comes in today, and no it has got nothing to do with tech database giant Oracle. This is actually related to solving the most debated shortcoming of smart contracts in blockchain networks.
I wrote about a few of the recent developments in smart contracts recently, where individual blockchain projects were addressing the issues of scalability, privacy & security. Chainlink, however is attempting to solve the single biggest problem of smart contract and a shout-out from the tech giant Google has propelled this novice blockchain token project to the limelight. More on this later, but first a brief introduction about the company.
Chainlink presents itself as decentralized oracle solution that acts as a middleware agent between traditional data sources, blockchain projects & the smart contracts with its own native token called LINK. The parent company SmartContract.com, was founded in September 2014. Chainlink team is led by Sergey Nazarov, who joined the Crypto revolution in 2011 – his career focus initially was building P2P marketplaces.
Before you get any more confused with the oracle problem, let’s define it. You see, smart contracts are coding instructions that self-execute under specified conditions on blockchain networks. The sources from where these smart contracts derive their data from are called “oracles.” The auto-enforcing ability, immutable nature, cost effectiveness & self-execution of these smart contracts make them a perfect agent for automating transactions with transparency and almost a zero chance of failure.
Ironically though, smart contracts are only as smart as the oracles that feed into them. On their own, they are just ‘dumb’ instructions of code – remember the old acronym GIGO (Garbage In Garbage Out). If you feed malicious code or bad data, the smart contract processes the information as is, producing an incorrect & unpredictable outcome, thus creating the ‘oracle problem’.
This is where Chainlink steps in – A decentralized blockchain (figure above) that acts as a bridge between the oracles (data sources, APIs, etc.) and the smart contracts they feed (on blockchains like Ethereum). The individual nodes on Chainlink act as smart contracts on their own – their job is to perform independent & decentralized computations to verify the correctness & accuracy of the data being fed into the smart contracts. Additionally, the middleware also ensures the privacy of the data between the smart contracts & blockchains. Chainlink offers various useful features like:
- Connectivity – Integrating smart contracts on various networks to existing applications & external data (Bloomberg etc.)
- Payments – Sending payments from your smart contracts to existing bank accounts & popularly used payment networks (PayPal etc.)
- Interoperability – Creating secure cross-chain connectivity between your smart contract & any other public (Ethereum) or private network (Hyperledger).
Now, we all know too well that there is always a cry from the skeptics about too much hype around blockchain projects & very little in the way of real-world use cases and application. Chainlink, it seems, is crossing that hurdle as well. SWIFT, the largest international banking communications system (11,000 partners) is going to use the Proof-of-Concept (PoC) system being developed by Chainlink, which could become a standard by 2020.
More importantly was the recent announcement by the tech giant Google of integrating Chainlink’s middleware with its BigQuery enterprise cloud data warehouse. The blog post goes on to describe the usefulness of smart contracts & how the oracle smart contract can be used to vet the data being fed into smart contracts. According to the post, Google has made blockchain data public for eight different cryptocurrencies available in BigQuery through its Google Cloud Public Datasets program.
The immediate reaction after being ‘Googled’ by the tech giant was a spike of 75% in the price of Chainlink’s native LINK token, which had actually dropped 20% at the launch of its main net on May 30th (chart above). A simple mention of usefulness & real-world application of Chainlink by a current tech giant means it might have a much bigger role to play in the upcoming decentralized future. LINK – 24th cryptocurrency by market cap (~ 595 million) is trading @ $1.70 up almost 10% on the day at the time of writing.